World’s Most Innovative Patent Troll Sues the Government

Jay Mac Rust.

It’s no surprise when a patent troll sues a big tech company like Apple and Google. We’ve grown accustomed to these tiny outfits that use their patents solely to attack other, wealthier operations. In recent years, they’ve become a scourge of the technology industry.

But now, one of the most notorious patent trolls has taken aim at an unexpected target: the U.S. Federal Trade Commission.

An outfit called MPHJ has filed a “preemptive” lawsuit against the FTC, claiming the government agency is unlawfully interfering with the company’s right to enforce its patents, as first reported by Ars Technica. The suit shows that patent trolls are still expanding their bag of tricks, but the exploits of MPHJ could ultimately spark some much-needed reform to the U.S. patent system.

MPHJ didn’t invent any new technologies. According to Reuters, it acquired its patents in 2012 for a single dollar. But it’s something of an innovator in the world of patent trolls. Instead of suing large tech outfits, it goes after small businesses. But these brazen attempts to make money from outfits with tiny legal budgets has attracted both state and federal government agencies.

According to a lawsuit filed in the state of Vermont, MPHJ is owned by a Texas lawyer named Jay Mac Rust. The company claims to hold a set of patents that cover the process of scanning a document and sending the file to an email address with a single click. But rather than going after tech giants that make and sell scanners and photocopiers, MPHJ targets the customers who may have purchased such products.

By its own admission, MPHJ and its 101 subsidiaries have targeted over 16,465 small businesses. The company gives its targets the option of either paying roughly $1,000 per employee to license the patent or signing a document swearing under penalty of perjury that they don’t use the email-to-scanner technology.

The company claims that going after individual users of the technology is not only legal, but the only way for it to enforce its patents. “Several of the major manufacturers have talked to us about these patents, and they agree with us,” a lawyer representing the company told Ars Technica last year. “The product they sell is not infringing. It’s putting the whole system together. If you have an office scanner that scans with one button, is hooked up to a network, and can send email—you infringe.”

According to MPHJ’s complaint, the FTC threatened to sue the company for deceptive trade practices. But MPHJ claims that the FTC is overstepping its bounds because patent licensing doesn’t constitute commerce.

Furthermore, the MPHJ’s filing claims that the FTC offered to settle out of court, but then “sought relief far beyond what the FTC could obtain by litigating in federal court and securing a judgment.”

The irony is that MPHJ is drawing wider attention to the patent trolling problem. It’s the first patent troll targeted by the FTC, and the company has already been been sued by the states of Vermont and New York. Last month, the U.S. House of Representatives passed a bill designed to rein in patent trolls, and according to Ars Technica, MPHJ was specifically mentioned during a hearing to discuss a Senate version of the bill.

In the meantime, companies continue to stockpile patents in hopes of fending off lawsuits. But individuals and small businesses have little protection against companies like MPHJ. Let’s hope that changes.